Trian Partners Activist Presentation Deck
Why Is It Cheap: The Bear Case
The Bears' Concerns
■
European exposure
- Spain & Italy are ~10% of sales and
higher percentage of EBIT
- "Contagion" risk - other countries
vulnerable (France, UK, etc.)
Yogurt is high percentage of
sales
- Increasing private label competition
- Innovation cycle slowing?
Organic growth is slowing
- 2012 expected to be at low-end of
5-7% range
- 2013 guidance may again be at low
end given Spain / Italy weakness
Source: Company filings, Street research.
(1) Nestle emerging markets as percentage of sales as of December 31, 2011 per
Annual Report.
Trian View
▪Solid geographic profile
- Approximately 10% higher Emerging
Market exposure than Nestle (52% vs.
40%)(1)
-5-
- Slower EBITDA growth in 2012/2013
priced into the market (including potential
near-term pressure on earnings estimates)
- France, Germany, UK better consumer
environments & more balanced product
mix
- Fundamentally sound category
- Danone has leading position (23% global
market share)
- Yogurt still compelling growth category;
huge per capita consumption opportunity
in many large geographies (e.g. US)
- Private label trends should moderate as
economy recovers
Though there are valid concerns in the near term, we believe buying Danone at 1.5-
2.0x P/E and -33% FCF discount to European food peers more than compensates
▪ Organic growth is still strong
- Even under duress, Q3 2012 organic
growth was 5% (vol +2%, price/mix: +3%)
- Intrinsically strong categoriesView entire presentation